Gold Forecaster
- Global Watch
The gold price is not discounting
the full $ story!
Julian D.W.
Phillips
Gold Forecaster snippet
Nov 30, 2007
The foreign exchange markets
are not solely about exchange rates. They are about values,
smooth flowing of international trade, about trust and reliability.
The sight of the $ falling over a long period of time, with
bounces and recoveries that don't change the downward trend is
far more than simply a drop in value!
The $ is steadily weakening,
but more than a drop in the $' international value is happening
here. The loss of confidence is in the $ is accelerating each
time it slips one or more percent on a persistent basis, with
small short recoveries being seen in the midst of this decline.
How important is this loss of confidence? Critical for it
precedes policies, which long-term will lessen the role of the
$ to one of the world's top 5 currencies. Growing surplus holders
don't want to dump the $ for fear of losing value in the remaining
ones in their portfolio, but don't think that a dumping of the
$ is what it will take to remove it from the position of principal
global currency. All realize that it is the knowledge of the
declining value of the $ that will bring on a major toppling
of that currency. So it is a choice of a steady 'controlled'
fall or a steep decline to disaster. To get perspective on
the global scene what is the thinking out there?
- China & neighbors: - China's premier, Wen Jiabao has
expressed concern at the decline in the $, of which they hold
$1,430 billion which total is growing by the day. He said it
was becoming difficult to manage these reserves, while their
value was under unprecedented pressure. China has stockpiled
£700bn worth of foreign currency, and has only to decide
to slow its accumulation of the U.S.$ to weaken the currency
further. Yes, Europe is now its top customer so it is acquiring
the € at a rapid pace, but it has to lower the $' presence
in their reserves. So, what can they do? All they can do is
to speed up the spending of them on assets, other currencies
and whatever else they can and as quickly as they can. The
warning by the Premier was reinforced by a Chinese central bank
vice-director, Xu Jian, who said the $ was "losing its status
as the world currency". Korea's central bank has urged
shipbuilders to issue invoices in the local currency and take
precautions against the weakened $.
a
- The Middle East: - Kuwait, which cited imported inflation
as the reason for its decision to drop the $ peg. The Dinar has
gained 4.76% since the central bank switched to a currency basket.
The Saudi Riyal rose to a 20-year high after the Fed cut rates
on Sept. 18 and the Saudi Arabian Monetary Agency chose not to
follow. This set off an appreciation of the Riyal from the
time just after al- Suwaidi questioned of the United Arab Emirate's
currency peg to the $. Saudi Arabia may be considering its
first revaluation in 21 years to help bridge a divide with oil-producing
neighbors worried about their pegs to the $. UAE Central Bank
Governor Sultan Nasser al-Suweidi said last week he was under
growing social and economic pressure to follow Kuwait's lead,
although he would only act in concert with Saudi Arabia and three
other states preparing for monetary union. Contracts to buy
12-months futures in the U.A.E. Dirham rose the most in at least
10 years this week after al-Suwaidi's comments, to trade at a
2.5% premium to the spot price. Businesses are complaining
about rising costs and migrant construction workers rioted in
Dubai this month to demand a pay rise to compensate for savings
lost due to the $'s slide. The U.A.E. economy ministry said
exchange-rate reform would be one of the ways of containing inflation
driven by the dollar's slide, which was making some imports more
expensive. OPEC's $6 billion development fund is hedging its
exposure to the weakening $, Director-General Suleiman Jasir
al-Herbish said this week. Last month the central bank of Iraq,
four years after the United States invaded, stated that it wished
to diversify reserves from a reliance on the U.S. $.
a
- Other O.P.E.C. nations: - Venezuela backed an Iranian proposal
to add the group's concern over the falling $ to a summit declaration
to be made today. Saudi Arabian Foreign Minister Prince Saud
Al-Faisal said that no mention of the $ should be made in the
declaration because he didn't want the U.S. currency to "collapse."
Nigerian Finance Minister Shamsudeen Usman said last Friday
that his country's laws has been changed to allow it to diversify
its foreign reserves out of the $. Angola may shift its international
reserves away from the $, Finance Minister Jose Pedro de Morais
said. Angola has $10.2 billion of foreign-currency reserves.
De Morais said around 80% of the reserves are in the U.S.$.
Three of the world's big oil exporters, Iran, Venezuela, and
Russia, are demanding payment in the € rather than in the
$. Iran insisted that Japan should make all its payments for
oil in Yen, rather than in the $.
This list of important $-holding
entities concerned about the $ and one that's getting longer
by the day.
We are moving to the end of
the U.S. $'s 62-year reign as the world's main international
currency for trade, financial transactions and central-bank reserves?
Unless something is done to give real value to the $, we believe
that the process has to accelerate, rupturing the global monetary
system, only to bring back Protectionism in the large trading
blocs, exacerbating political and economic instability. We
see this rising wave of concern moving forward to a major crisis.
Any calming of the situation will cause a short-term strengthening
of the $ to be followed by steeper declines.
On the back of this, confidence
in the precious metal markets, particularly gold and silver,
will climb as a counter to the decline of the $.
Please subscribe to GoldForecaster
for the entire report.
-Julian D.W. Phillips
email: gold-authenticmoney@iafrica.com
321gold Ltd
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